Under recently released IRS Revenue Procedure 2011-34, real estate professionals can now more easily make late elections to treat all interests in rental real estate as a single rental real estate activity. This election can help them retroactively meet material participation requirements and deduct losses, potentially generating an income tax refund. This article discusses the various requirements involved.
Property owners often wrestle with how to classify their repair and upkeep costs — are they routine maintenance costs, which are immediately deductible against current income? Or are they capital expenditures that must be recovered over time through depreciation? This article discusses proposed IRS regulations that would help clarify how such costs should be treated for tax purposes. As a sidebar explains, the regulations also provide that “inherently facilitative” transaction costs must be capitalized.
On June 28, the U.S. Supreme Court generally upheld the Patient Protection and Affordable Care Act of 2010. The decision has far-reaching implications, many of which will financially impact businesses and individuals. This article provides a brief overview of the decision and its financial impact on businesses and individuals.
The IRS audits only slightly more than 1% of all individual tax returns annually. The agency doesn’t have enough
The Tax Court has concluded that a taxpayer could not modify purchase price allocations that it agreed to in connection with two asset acquisitions. The taxpayer made the modifications in an attempt to secure quicker depreciation deductions following a cost segregation analysis. The Court concluded that IRS did not abuse its discretion in prohibiting the taxpayer from determining useful lives of assets in a manner that was inconsistent with the original allocation schedule.
In Chief Counsel Advice (CCA), IRS has concluded that based on the legislative history of Code Sec. 163(h), until regs are issued, taxpayers may use any reasonable method in allocating debt in excess of the acquisition and home equity debt limitation, including the exact and the simplified methods in temporary regs issued under a previous version of Code Sec. 163(h), the method in Pub 936, or a reasonable approximation of these methods.
IRS has issued proposed regulations that would provide a new definition of limited partnership interest for purposes of Code Sec. 469(h)(2), which treats limited partnership interests as passive interests for passive activity loss (PAL) purposes except as regulations provide otherwise.
Observation: Under the new definition, more partnership interests could escape treatment as passive interests.
People are rarely sued when a deal goes as planned and all financial expectations are met. But we rarely structure deals and form legal entities for the best-case scenarios. We structure them to protect us from the worst-case.
For those who have recently purchased or built a new building, or even substantially remodeled an existing building that they own, faster write-offs are only a cost segregation study away. A cost segregation study identifies property components and their cost, allowing owners to maximize their current depreciation deductions by using the shorter lives and faster depreciation rates available for the qualifying parts of the property. But the overall benefit may be limited in certain circumstances. This article explores some of the details, while addressing the concern some have as to whether a cost segregation study might trigger an audit.
If you own a vacation home, it pays to consider the income tax implications, especially if you plan to use the home for both personal enjoyment and rental income. In some cases, minor adjustments in the way you use the home can reduce your tax bill.